The sentiment surrounding the European currency remains firmly in the hands of sellers, exerting pressure on the risk complex as a whole. On Wednesday, the EUR/USD pair dropped to fresh lows near 1.0830.
EUR/USD Weakened by Increased USD Demand
Persistent risk aversion continues to drive investors toward the US dollar, keeping the EUR/USD pair on the defensive for the second consecutive week. The currency pair now hovers around 1.0830, a level last seen in early April. This decline is fueled by ongoing concerns about the US debt ceiling issue, along with a slight decrease in German 10-year Bund yields.
Adding to the negative sentiment towards the euro, ECB’s Board member de Cos stated that the bank’s tightening cycle is nearing its end. This view, however, contradicts the opinions of many of his colleagues, who expressed a preference for maintaining a tightening bias in the June, July, and possibly September meetings.
Regional data indicates a 17.2% year-on-year increase in New Car Registrations in the EU up to April, while final inflation figures for the broader Euroland in April are expected later in the morning.
On the other side of the Atlantic, the week begins with Mortgage Applications, followed by Housing Starts and Building Permits.
Key Factors Affecting the Euro’s Performance
EUR/USD continues its downward trajectory this week, inching closer to the crucial 1.0800 level.
The euro’s movement is anticipated to closely mirror the behavior of the US dollar and may be influenced by any divergent approaches between the Fed and the ECB regarding interest rate adjustments.
Looking ahead, the continuation of a hawkish stance from the ECB supports the possibility of further rate hikes. However, this viewpoint contrasts with a slight loss of momentum in the region’s economic fundamentals.
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